The resurgence of Indian IT sector

The country’s Information Technology and Business Process Management industry, known globally for highly efficient deliverables, has replenished itself with the latest in innovation and services to strengthen its future growth

January 2, 2018

India’s IT-BPM companies are expanding their offerings with the most modern and efficient technologies and reskilling workers accordingly to improve their future growth

The SMAC (social, mobility, analytics, cloud) sector, which merges four technologies to drive growth in business innovation, is expected to grow to US$225 billion by 2020

The country’s IT giants have also streamlined their operations in order to improve efficiency amid shifting market dynamics marked by income and technological disruptions

Ministry of Electronics and Information Technology expects India’s digital economy to grow to US$1 trillion by 2025 with employment potential of 5-7 million in the IT sector

India’s Information Technology and Business Process Management (IT-BPM) industry is reinvigorating itself with the latest in technology and services in order to better serve its global clientele. The initiatives will also help the country’s IT giants secure their future growth amid shifting market dynamics marked by income and technological disruptions. Last year was particularly difficult with threats of visa restrictions for foreign IT workers in the USA, digital disruption of old business models as well as automation of services leading to job losses. Even India’s IT industry’s usually upbeat body, National Association of Software and Services Companies (NASSCOM), turned cautious, forecasting a tepid growth rate of 7-8% for the sector in 2017-18. However, challenges are subsiding with the industry’s proactive countermeasures successfully bringing back lucrative and high-value contracts to Indian IT companies.

As a report prepared by industry body, Confederation of Indian Industry (CII), and Deloitte Touche Tohmatsu Ltd puts it, “Indian IT services industry is going through a transformation, to IT Services 2.0. While phase one was about decades of double digit growth at high margins leveraging global delivery models through cost effective platforms, phase two will see Indian vendors helping global enterprises in their strategic business transformation through digital services using an optimized delivery infrastructure, and also profitably addressing digital economy initiatives in India helping bring technology to billion plus people.”

Rising opportunities in India’s IT sector

Broadening of India’s telecoms network, increasing penetration of the internet and smartphones, the state’s push towards e-governance as well as rising popularity of electronic delivery of a range of services have created increasing scopes of foreign investments in India. A huge opportunity exists for mapping IT services to India Stack, which is a set of application program interfaces (APIs) for cashless delivery of e-services on a secure platform. Buoyed by these developments, India’s Minister of Electronics and Information Technology, Ravi Shankar Prasad, had said that India’s digital economy could grow to US$1 trillion by 2025 with employment potential of 5-7 million in the IT sector.

According to NASSCOM, two-thirds of India’s private banks and 20-30% of public banks will be adopting digital technologies in the next two to five years. Digital transactions have increased at a compound annual growth rate of 50% in the last three years. India currently has around 432 million internet users, the second highest after China. Supportive Government policies such as Startup India, with more than 4,750 startup ventures and funding of around US$4 billion along with the Smart Cities Mission aiming to set up around 100 such settlements by 2020 will further add to the prospects of investment in the domestic IT market.  

The SMAC (social, mobility, analytics, cloud) sector, which merges four technologies to drive growth in business innovation, is expected to grow to US$225 billion by 2020

Among the fastest-growing segments in IT is engineering research and development. The segment focuses on high-end services and is growing annually by 10.5 per cent, according to NASSCOM figures. Meanwhile, the testing and analytics sector is growing by 9 percent, with a focus on embedding digital solutions. The SMAC (social, mobility, analytics, cloud) sector, which merges four technologies to drive growth in business innovation, is expected to grow to US$225 billion by 2020. In line with these opportunities, at the Bengaluru Technology Summit in November 2017, 10 agreements were signed in emerging technologies such as Internet of things (IoT), cloud computing, analytics and big data with companies, including Virgin Hyperloop One, Intel Corp and 3M Co. Additionally, Dell EMC has said that it is eyeing a US$150 billion opportunity in IT infrastructure under the Indian Government’s Digital India initiative.

Initiatives drawing renewed interest

India’s rapidly growing e-commerce space has also attracted huge investments. Top deals in 2017 included an investment of US$2.5 billion in Flipkart by Japan’s SoftBank Group Corp, followed by another investment of US$1.4 billion in Flipkart by Tencent Holdings Ltd, eBay Inc and Microsoft Corp. Other top deals included a $1.4 billion investment by SoftBank in One97 Communications Ltd, which runs Paytm. TCS has recently renewed its multi-year outsourcing deal with Nielsen for US$2.25 billion, extending the deal to 2025. About half the value of the deal is reportedly from digital services.

Following streamlining initiatives, Indian IT firms have already started reskilling drives to equip the workforce to adapt to new technologies. An analysis of the skilling/reskilling programs of IT-BPM firms by NASSCOM in 2017 indicated that more than 50 per cent of the workforce of large-sized corporations has already been trained in digital technologies; for medium-sized firms, it is 33-35 per cent and for small ventures, 38 per cent of workforce has been reskilled.

India has a large pool of STEM (Science, Technology, Engineering and Mathematics) talent, thanks to a broad network of engineering and science institutes. Additionally, there are already more than a hundred centres of excellence in blockchain, IoT and analytics, over 250 startups in cloud technology, around 240 in big data and analytics, about 150 in IoT and more than 135 in machine learning and artificial intelligence. The industry has faced headwinds before, such as the dotcom bust in 2000 and the global financial crisis in 2008-09 and it has managed to transform itself every time. This time too, the industry is poised to harness the new opportunities. The signs of a turnaround are evident from reports of hiring trends from campuses, which are finally showing increased job offers in IT.